Fee setting – getting it right

Sales and marketing director at DPAS Dental Plans, Andrew Warren, gives dentists an insight into the all-important task of fee setting within a capitation environment.

Accurate pricing of any product or service is vital if it is to be sustainable and return the correct level of margin to a business over time. The pricing of a dental capitation scheme is no different.

Within the context of a capitation scheme, fees are set within categories: A, B, C, D and E. Determining the price for each respective category requires the dentist to firstly establish an accurate hourly rate, and secondly to allocate treatment time to each category.

Setting fees

To establish a realistic hourly rate you must include all of the annual costs of the practice: rent, rates, heat and light, salaries, pension contributions, material costs, etc. You must also include in the calculation the gross income you want to receive. This figure is then divided by the number of hours to be worked, including an allocation for holidays, resulting in an accurate hourly rate. Your retained accountant is best placed to provide all of the information you require to carry out this exercise as diligently as possible.

The basis of a capitation scheme requires patients to be placed in the category that best reflects their dental needs. Categories are normally based on an allocation of time, for example, category A equals 15 minutes, B equals 30 minutes, C equals an hour, and so on.

Based on the hourly rate calculation, each category is then allocated an appropriate fee. Most categories include hygiene appointments and because a hygienist’s time is charged at a lower rate than that of a clinician, there should be an adjustment made for this.

Some dentists can find fee setting a daunting process and I’m pleased to say that our sales team is equipped to help you to arrive at your hourly rate by reviewing costs with you on a one-to-one basis. However, we are not financial advisers, so as suggested above, you should always seek confirmation from your retained accountant before publishing the figures.

Time-based categories

Because of the process used to calculate fees, it follows that failure to place a patient in the most suitable category can have serious consequences for the profitability of the practice, meaning the initial patient assessment is very important. During this examination you should assess the risk of treatment associated with each patient, and place them in the correct category according to that risk.

At DPAS we encourage the use of a charting system, which suggests the most suitable time-based category for each patient, according to need. It is vital that you avoid placing patients in a lower category just to get them into a private capitation scheme, as this can be a very costly mistake that may take many months to detect. The beauty of the capitation system is that because it involves allocating varying amounts of time for each category, it is possible to build in some time for discussing treatment options, meaning that you will actually get paid for the time you spend talking to patients about cosmetic or implant treatment, for example.

In a capitation arrangement there is an option to exempt more complex and unpredictable treatments, for example endodontic and cosmetic treatments, implants, etc. Capitation schemes, which include crown and bridge work, normally charge laboratory fees as an additional item as the costs of these services are also difficult to predict.

One of the most important and often forgotten aspects of fee setting within a capitation scheme is that it is not a once-only task. An annual audit must be carried out to ensure that patients remain in the correct category. Our team can carry out this audit on your behalf and is another example of DPAS’s comprehensive service.

Following the audit, where necessary, patients should be moved from one category to another. This is a simple process, which involves informing the patient and is something that happens particularly when a practice changes hands. In such cases a new dentist is underwriting the risk from patients they have never seen before and is the reason why in some cases, a prospective buyer will ask to examine some capitation scheme patients before completing a purchase.

Realistic rates

Fee setting is a process of making sure you have factored in all the necessary elements to arrive at an accurate figure. It is a straightforward business process and is no more than any other business would do in the pursuit of operational efficiency. It is crucial that the hourly rate and therefore the fee itself is realistic, but do not be swayed by the fees of competitor practices. Whilst remaining competitive can be important, there are individual circumstances that determine patients’ choice of practice and this is not down to cost alone.

By its very nature, a dental plan demands that you are able to arrive at a realistic hourly rate that enables you to set the plan fees accurately. DPAS has many years of experience in this field and gives dentists a comprehensive advisory service that is about much more than just introducing the dental plan itself.

In essence, fee setting for a capitation scheme is a simple process. If you set your hourly rate correctly and include all the costs of the practice, get some advice and review patients by carrying out an annual audit, you will be certain that patients are in the right category and that your capitation scheme fees remain profitable.

Visit stand J30 at Dental Showcase and discover how Business Bites from DPAS Dental Plans can help you grow. Play the ‘Find the missing piece’ game, with the chance to win prizes ranging from high street vouchers to an iPad mini. Alternatively call 01747 870910 or visit www.dpas.co.uk.

Andrew Warren, sales and marketing director at DPAS Dental Plans, is a former dental technician who has been involved in private dentistry for over 40 years. Andrew has a deep understanding of the challenges that now face others in the profession in these unsettled times. He was part of the original team that set up dental plans over two decades ago.